First Published: 31 May, 2023
We have invited one of the founders behind one of New Zealand’s biggest beverage brands, Pals Co-Founder Mat Croad to share the story of their phenomenal success from initial idea to its current cult status.
Since launching in 2019, Pals has become one of the fastest growing RTD brands and transformed the category in a short time. Seeing a gap in the market for a brand that customers could truly connect with, Pals is all about bringing people together – and this brand premise is reflected in all its activities. Read the full Q&A below!
Mat: It was a bit of a journey to be honest I'm not sure if anyone's aware that we actually started in wine. We launched a wine brand called Master of Ceremonies and the purpose of that brand at the time had similar philosophies regarding what was transferred over to Pals. It really came about because we felt originality and innovation at the time in the wine industry was somewhat stale and historically bound to restrictive boundaries, so we decided we wanted to disrupt that market a little bit.
After a few years we got to a point where we realised it wasn't the right product for us. Wine is so incredibly tough, return on capital is extremely slow, very unscalable and it didn't have a very adaptable business model, we were sort of mapping out where we wanted to be from a growth perspective and worked out it was going to take us about 10 years to get there, so we thought well we need to fix this. We had a pretty sound business model and we've got a sound distribution network throughout the country so let's look to transfer our brand building skills into a more scalable product.
We wanted to deal with a far less complex supply chain, with wine you're at the whim of weather, locking in tonnage 12 months out before you sell it so if any big changes come in a good or bad way there's not much you can do about it. We didn't own the primary resource, so we didn't have much control over that part. We started looking at all options available, let's use the competitive advantage we have at the moment as a business which is our distribution network, we looked at everything we could plonk into that network and it was sort of a precipice of when we're starting to see this real changing consumer behaviour. You can see sort of splattering of it across different categories that sugar was getting a lot of attention with people looking to buy products that work better for you. So we made the call after surveying and evaluating every type of brand option you could think of every type of product option, we made the call I think it was in February of 2019 that 'Better for you' RTD was the product we were going to launch.
So it was from that point it was "let's start with a brand name" we went externally, we had very limited funds so we went around getting help to put forward brand purpose brand names and a story behind it of how well it would do in the market. Unfortunately none of it really sat quite right with us and we'd just blown what little money we had left, so the only option was to do it ourselves. Myself and my business partner essentially locked ourselves in a room and started formulating a bit of a plan around what this thing could be called. We were looking at all angles. We took a lot of learnings from the wine business, a lot of things have been done well, a lot of things could be done better and we would not be where we are today without the learnings from that wine process.
The brand was called Master of Ceremonies and you quickly learn that when people talk about your product the everything's shortened "grab me a bottle of Masters" you know, let's make it easy on ourselves and to get that real brand strength let's make sure the shortened version is the full name, whatever letters we used we want it to be aesthetically pleasing.
We wanted the brand name to have a sort of consumer connectivity around how you talked about it and what that word meant. So there was all these sorts of intricacies thinking about it so it was a really considered process. We got down to a final few and after a bit of heated debate back and forth we decided that Pals was the right brand name.
Mat: We did it in a couple of days. So that was the brand name and we knew the look and feel we knew we wanted the brand to really stand out and I guess that's with it now iconic pastel colours have come in we wanted the brand to be premium but we wanted to have personality but be approachable, and that part was really tough of how we gained that aspect of approachability while keeping the premium nature, and that's where the illustrations were born.
The illustrations took a long time because there's a very fine line for introducing illustrations on a product. It can't look tacky as it could potentially bring down the premium nature of it. So as that was sort of developing, we were also working on the formulation phase. With every flavour we release we are extremely vigilant; the whole premise of this thing was that we base it on a couple of values and those values still exist in our business today.
It was really around that originality and innovation we didn't want to look at something and say "let's do a better of version of that" we wanted to be creative and innovative so looking at this product it wasn’t "what's the one big thing we can do to set us apart" but “what are a lot of little things we can do great”.
As part of the “Better for you” movement the easiest option was to look at lowering the sugar levels. We also wanted the product to be gluten-free and vegan friendly, which at that time no one was. As part of the process you find out why these things don't exist... because they're hard and expensive. You can't buy that vodka or those spirits in New Zealand, but we hung our hat on that and said we have to sit by this, so we managed to find a supplier overseas. We had to import our own premium vodka, it was a hell of a lot more expensive but again because of the premium nature of it, we now had a really smooth base to work on. It has all natural flavours so no natural sweeteners we wanted the product to taste real, again, harder to source and more expensive. We wanted to get the best fruit we can so that's where the Providence element came in - Central Otago peaches, limes and lemons from Hawkes Bay, so there were all these elements that sort of molded the product into setting it apart at the time. Even in the final little intricacies on the back of the can there's a thermochroic ink of the word ‘cold’ so that when the products cold it turns blue. We were really vigilant around making sure we wanted that product to be set apart from the field as much as possible.
Mat: Yep. Master of Ceremonies was still ticking along.
Mat: We have, and it hasn't stopped. Even the way we do business now the problems are bigger, and the fires are a little bit hotter. It's still fighting fires and getting across challenges if you're really trying to do business in a different way and be original and innovative. It's a bloody tough way to do business but it's what drives us, so those sorts of philosophies are still what we hang onto today.
Mat: Yeah there's probably a few. Once the product launch to market the initial wave of popularity was far beyond what we expected. We had people saying to us that we planned all of this like absolute bullshit. There's a great element of luck within this. We sort of entered into this category at the perfect time, we launched in February 2019 and the product was on the shelf in October 2019 the first run completely sold out second run completely sold out we were just absolutely scrambling to make as much product as possible. We unfortunately sold out right before New Years Eve and Christmas to so it was a little bit of a "wow" moment for us. I remember that summer walking round and there were just rubbish bins full of cans of Pals so we were just thinking “what is going on, this is absurd!” We were getting retailers calling us up who had never heard of the brand before and never heard of us saying "We're getting customers coming into our store asking for this product Pals we don't know what the hell it is we don't know who how you guys are but they're walking out of our store if we don't have it" so that was the sort of avalanche effect.
Mat: Essentially yeah, we had a bit of a platform from the wine brand in terms of putting the message out to market via socials, but we didn't have any money we didn’t have any marketing fund. There was no big campaign to launch, it was just a product that was needed and there truly was a gap in the market for a product like this. It was consumer-led demand which is the best type of demand you want.
Circling back to a couple of key moments, there's been so many along the journey and we always talk about this but the things we say no to are probably more important than the things we say yes to. When you're a brand like us that's got thrown into the limelight so quickly there were shiny objects everywhere and troves of people hitting us up everywhere with potential collaborations and partnerships and we had to be very considered around what we did moving forward. Looking back there were probably a whole heap of things we could have done for a decent financial gain, but it might have been detrimental.
Mat: Yeah I mean the social platform is it's a tough one. It's something that I think outsiders looking in always give us compliments around, and it's always deemed as being really successful I think it won an award last year for being the top business social platform in the country. At that time we were going through a potential refresh of our socials because we were incredibly unhappy with what we were putting forward so I guess it shows that de-alignment internally or externally.
The platform changes and it changes so swiftly and if you think about what it was delivering even six months ago to what it is now, the trends are moving away from beautiful, polished content to now people want to see real content. You have to keep moving. We are really aware in our business that we need to evolve and adapt quickly and socials for us is an incredibly key channel that we've got the microscope on. Our team literally talk about it every single day and there's a whole heap of things within that channel that we think we can do better and it's just one of the many reasons in the business where forever trying to uplift and move with the times making sure we getting the right content out to our followers.
At the heart of it socials are the first thing we really need to focus on and understand as a business why is that platform there for you and how do you want to use utilize it in developing and manipulating your content to fit your brand and get across the right messaging. It feels like for us it's almost evolving by the month.
Mat: Yeah we've been really lucky with this brand, the consumer connection we get from people tagging the products or whenever we're doing any campaigns or competitions or releasing news that the feedback we get from consumer customer base is amazing.
I guess it's hard to explain how we go about that it's inherently in our DNA in business that whatever we do we want it to feel approachable and want we want to feel like we can connect with our customers. We've got five key values within our business; originally, innovation, quality, consumer connectivity and sustainable business practices, and those five values are (I don't wanna sound cheesy) but they really are at the heart of every decision we make. Sitting in the office whether it's the marketing team or supply and ops, you'll hear the guys having discussions and you'll hear someone bring up “Oh I don't think that lies with our values” or “It's not really innovative enough” or “I don't know if it's delivering the right consumer connectivity” and a brand owner and cofounder that's the times like holy **** we really have complete alignment here with what we're trying to achieve and that's the really proud moments.
Mat: It's hard, it’s losing sleep at night. It's something that we are challenged with every day we know we've got a massive target on our back. The business was built around being original and innovative you so there's a lot of things within this category, even in the alcohol category that we've done first. First doesn't last forever and at some point in time you will run into copies so you've always got to be ahead of the curve. For us were consistently looking at brand, product and marketing and we're well aware of the continuing investment that we need in those three and it's a huge importance within our business. I guess it differs per market, but the amount of time and investment that our team puts within that space for the brand is it's pretty high on the whole business.
Mat: Yeah, oh incredibly tough. I certainly can't sit here and take the credit for that, It was our Head of Marking Kate who really led the charge on that piece of the business. As brand owners from us it was something from day one that we knew we wanted to do. Looking after our people, our community and our planet, it wasn’t something we wanted to overcomplicate, for us this is just the right thing to do, and we really hope that at some point it will just become the new norm.
So for the community aspect, we launched a charitable campaign called ‘Unsung Pals’ so we’re finding people in our community that are the true definition of an unsung pal. Maybe it’s someone who has a full-time job and in their spare time they're doing a whole heap of community work just off their own bat, we look for someone who's not asking for any recommendation and is known for doing great things, but they never talked about. This is our way of coming in and helping that person and helping their community.
Lastly the planet aspect, B Corp are hugely rigorous around the tracking within your business from emissions, we’ve now become carbon negative which was a really hard process to go through and actually quite expensive too. It’s hard because I know there's probably a lot of small businesses who want to be there but unfortunately at this point in time to meet the mark in that space you have to make the investment. It took us about 12 months to get across the line but again that's probably something to date that we would be most proud of that of everything we've done.
Mat: Yeah challenges the right word. I feel like half the time in our roles we're just professional firefighters. In terms of Australia, that happened relatively quickly. To be fair we probably got a little bit ahead of ourselves and said “Let's see what we can do in Australia” only six months after we launched in New Zealand. We reached out and managed to broker a deal with Woolworths who own BWS and Dan Murphy's, so that's 50% of their entire liquor market.
We thought “How are we going to enter this market? Let's swing for the fences, absolute hail mary." We didn’t think we were going to pull it off but somehow, we did. We managed to broker an exclusive deal with them in the midst of COVID so it was all from essentially the bedroom at home over zoom. We sold in the Australian market for about a year and a half before we could even step foot which was pretty crazy. Finally getting over there and walking into a store in Australia and see the Pals product on shelf is pretty cool.
It's going really well but we haven't invested from a brand perspective to the level we would have liked, and that was probably because of COVID. People might not be aware of this but we're a bloody small team, there's 10 of us in a little office in Eden Terrace. We're not some big corporate with a massive marketing budget so we really are the small guys playing in pond ruffling feathers against the big boys. It's a category in an industry that is always really been owned and dictated by the big boys so it’s a battle which we love. For us now with Australia it's just making sure we've got the right resource in place to really grow and bring the brand to market properly over there.
Mat: I think as long as we stick to those key values and key missions and keep that at the heart of what we're doing, I think will be on the right track and those missions and values are right for us for now. We've got some really exciting things coming. Last year we had summer ripped out from underneath us which is a huge time for our business. We had a whole heap of brand activations planned that we couldn’t roll out. Over the last 12 months in terms of these inflationary pressures and cost increases within the business it’s just been unreal and it hit us extremely hard. For us, the cost to bring the product to market every single element has increased which we've completely taking that on board, we haven't had any big price increases, so we really had to get back to complete scrappiness on how do we do this on the smell of an oily rag. There are a few things that didn't get to come to fruition that we sort of just tried to do enough to make sure our brand still has relevance and we're making noise but this year we want to make up for a bit of their lost time so that’s that innovation piece that is really exciting.
Mat: Yeah. It's an interesting question and we could, and we have a platform that allows us to. We could release a beer or a wine or a cider or another RTD brand but like I said, with the popularity of Pals there were all these shiny objects everywhere from new markets to new brands and it's just making sure we keep our focus. For a minute we did have a look at all of them 'cause it is exciting, but then it's understanding what we've got in front of us with this brand and at the moment we're trying to deliver takes ten hours a day. We don't have the capacity right now and we wouldn't be doing this brand justice if we got sidetracked and started to look at things further afield. That's not to say we still can't innovate bring new things to market but these things take time and that needs to be considered.
Mat: Yeah, we’re proud of most things we’ve done. I think one of our favourites would probably be the launch of ‘The Red One’. This was the latest product we launched into market in October last year which was the vodka red peach and yuzu Pals. We wanted to keep it so secretive, we had created the product, we didn't tell our distributor what the flavour was, no one knew anything. We didn't tell any retailers what the flavour and we've been told this is the first time it's ever happened in New Zealand but we somehow convinced every liquor store, and there's about 1200, that they were taking the new Pals product on board when it launches in October but we're not telling you what the flavour is... but just trust us.
We managed to get across the line and got it to every distributor all wrapped up so they couldn't see what it was. Very highly secretive. The whole basis of this campaign was around building excitement around the launch so we did staggered deliveries to make sure that it turn up on the day that we were launching so no one got it earlier so they couldn't be leaks.
There's a term that we use internally “Only Pals could get away with that” and although we use it internally it was created externally and a lot of things we do people say “How the hell did you guys get away with that?” We started thinking “actually yeah, that's a great thing to hear, lets coin that internally.”
The colours of our brand hold so much strength and power. We did some research where we talked to consumers and retailers, and half our retailers didn't even know what flavour the drinks were. “What flavours the purple one?” “Oh I dunno, it’s the purple one!” People didn't know and it was all based on this colour aspect, so we really drew from that. The simplicity of that nationwide campaign of red billboards was so simple, but I guess what it drove from that and how that end-to-end campaign rolled out from the hype to the execution to the launch to the feedback on the flavour on the product itself, was a really proud moment.
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